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Settlement Agreements And Personal Injury Claims

It has become standard practice for employers to try and persuade employees to settle all potential personal injury claims against the organisation as part of a settlement agreement, at the same time as resolving the employment law dispute, despite the fact that any potential personal injury claim would be covered by their insurance.

When advising an employee on a settlement agreement, the adviser should exercise great care in relation to personal injury matters, as any personal injury claim could be worth an enormous amount, and far more than the compensation being offered under the settlement agreement, which is designed to compensate the employee purely for loss of their employment and any potential employment law claims they may have. The employee should not be sacrificing their right to be compensated for their personal injuries, as a condition of receiving compensation for the loss of their employment, etc. How an adviser deals with this, depends upon which of the following 4 categories of personal injury claim has been included in the proposed settlement agreement:-

  • Personal injury claims where court proceedings have already been commenced in the County Court/High Court
  • Personal injury claims of which the employee is aware, but where court proceedings have not yet been commenced. Negotiations may or may not have been initiated with a view to settling the matter to avoiding proceedings
  • Personal injury claims arising out of discrimination and/or bullying and harassment. For the most part, these are psychiatric injury claims
  • Latent personal injury/claims that have not yet arisen. Latent personal injury claims are claims of which the employee is not yet aware, as symptoms have not yet manifested themselves. Examples include asbestosis/mesothelioma and occupational deafness.

Personal Injury Claims: Court Proceedings Already Commenced

Where a settlement agreement is being negotiated and a personal injury claim is being pursued by the employee through the courts at the same time, then the employees adviser should ensure that the personal injury claim is specifically excluded from the settlement agreement by including a clause which expressly states that the claim is excluded from the scope of those claims being compromised. However, should the parties manage to settle the personal injury claim through negotiations during the settlement agreement discussions, then that settlement can be incorporated into the terms of the settlement agreement. This should be done by adding a clause to the settlement agreement setting out the terms of settlement, and by annexing a draft to the settlement agreement of the consent order that will be used to conclude the court proceedings relating to the personal injury claim.

Court Proceedings Not Yet Commenced, But The Employee Is Aware Of The Potential Claim

It is now standard practice for employers to include all personal injury claims of which the employee is aware within the scope of those claims being compromised by the settlement agreement.

Whilst the case of Bank of Credit and Commerce International SAI v Ali [2001] UKHL 8; [2002] 1 AC 251 related to ‘stigma damages’, the House of Lords also strongly indicated in that case (although this and subsequent case law do not conclusively rule it out) that personal injury claims would not be compromised by a settlement agreement via a general all encompassing clause that refers to all potential claims against the employer as being settled by the agreement. In the Ali case, the wording used was: “The applicant agrees to accept the terms set out in the documents attached in full and final settlement of all or any claims whether under statute, common law or in equity of whatsoever nature that exist or may exist and, in particular, all or any claims rights or applications of whatsoever nature that the applicant has or may have or has made or could make in or to the industrial tribunal, except applicant’s rights under [the bank’s] pension scheme.

Accordingly, to ensure that the settlement agreement includes personal injury claims of which the employee is aware within the scope of the claims being settled, a clause needs to be included within the agreement which expressly confirms that they are.

Where there is an express clause which seeks to include all personal injury claims that the employee is aware of amongst the claims being settled, then the employees adviser needs to establish whether the employee is aware of any personal injury claims. If the employee is aware of a potential claim, then the adviser should seek to amend the draft settlement agreement by including wording in the agreement that expressly excludes that potential personal injury claim from the list of claims that are being compromised by the settlement agreement.

Personal Injury Claims Arising Out Of Discrimination And/Or Bullying And Harassment

The overwelming majority of these kinds of personal injury claim relate to psychiatric injury (i.e. depression, work related stress, anxiety, etc).

Whilst these kinds of personal injury claims would normally be deemed to have been compromised by virtue of having included the discrimination/harassment claim amongst the list of claims being compromised, it is advisable and it has become standard practice for an employer to add to the express clause that includes all personal injury claims of which the employee is aware as being amongst those claims being waived under the agreement, additional wording making it specifically clear that this includes any personal injury claims arising out of any discrimination and/or bullying and harassment. A standard alternative is to include an additional clause which expressly includes these kinds of personal injury claims as being amongst those being compromised by the settlement agreement

Looking at the matter from the employees perspective, then again, as with any potential personal injury claim, should the employee be aware of any such potential claim, then their adviser should seek to amend the draft settlement agreement by adding worded that expressly excludes the potential claim from the scope of those claims that are being settled by the agreement.

Latent Personal Injury Claims/Claims That Have Not Yet Arisen

Latent personal injury claims should always be excluded from the list of claims that are compromised by the settlement agreement, and are normally excluded by adding a clause which also includes accrued pension rights and the right to enforce the agreement as items that are also excluded. Whilst employers normally agree to the latent personal injury exclusion from the waiver, it is standard practice for a warranty to be included within the agreement under which the employee confirms that they know of nothing that would give rise to such a claim.

Any clause that sought to include personal injury claims that have not yet arisen amongst the list of claims being compromised, would be void and unenforceable as it would constitute a breach of the Unfair Contract Terms Act 1977

Employee Accepts Settlement Agreement Despite It Compromising PI Claim

An employee is free to accept a settlement agreement, even though it will compromise their potential personal injury claim. Where the personal injury claim has been fully valued and the compensation offered reflects that valuation, and has been added to the compensation on offer within the settlement agreement, then it is perfectly acceptable to resolve the personal injury claim in this manner. Nevertheless, where the personal injury claim has not been properly resolved in this way and the employer is effectively asking the employee to sacrifice their right to bring a personal injury claim in return for compensating them for the loss of their employment and in relation to their potential employment law claims, then the employee still remains free to accept the settlement agreement. Nevertheless, the employees adviser should in these circumstances ask the employee to confirm in writing that they have received the necessary advice in relation to the personal injury claim that the employee potentially has, that the adviser has advised them not to accept the settlement agreement until it has been amended to remove the personal injury claim from the list of claims being compromised, and that despite this the employee wishes to accept the settlement agreement against advice regardless. On those occasions where it is not logistically possible to get the employee to provide written confirmation, then in the alternative the adviser should confirm the position in a full file/attendance note.

Posted in General Employment Law, Personal Injury Claims, Settlement Agreements and tagged , , .